He was once famed for his vast fortune and daring deals, but when Israeli tycoon Nochi Dankner was about to catch a break from the bank on his massive debts, public outrage kicked in.
Under a cascade of negative media attention, Bank Leumi, Israel’s second-largest bank, abruptly cancelled its plans to forego 150 million shekels ($42 million), a third of the debt owed by Dankner’s Ganden Investments.
“It seems things are going to change,” said Daniel Doron, head of the Israel Center for Social and Economic Progress. “For the first time in years, Israelis voted on economic issues, not security, and there are now people who want to make changes.”
The Bank of Israel now says it plans to investigate the cancelled deal.
A spokeswoman for Leumi said that since cancelling Dankner’s debt break last month, the bank had not entered into new negotiations with him and was “continuing all options to collect the debt.”
Dankner’s firm, Ganden, said debt-restructuring deals like the one it was planning with Leumi have always been a normal part of business in Israel and other Western countries. The companies that are part of Dankner’s IDB group have historically paid all their debts on time and are still working on a bank deal, said a spokeswoman.
“We are convinced we can also reach a fair and agreed arrangement with the banks,” she said.
Dankner’s IDB conglomerate is one of 10 large business groups that control about 30 percent of the market value of public companies in Israel.
Such conglomerates make use of a “pyramid” corporate structure, using tiers of holding companies to allow a powerful shareholder to hold sway over a business empire while actually owning only a fraction of equity in the companies it controls.
In Dankner’s case, Ganden is a private company through which he controls IDB Holding Corp., which in turn controls Israel’s largest supermarket chain, Super-Sol, Clal Insurance and leading mobile phone operator Cellcom.
Israeli media say the total owed by Danker’s firms is 9 billion shekels ($2.5 billion).
Israel is expected to pass a law this year constricting the power of pyramids. Holding companies will have to limit how many tiers of subsidiaries they have. Conglomerates will have to choose between owning major financial or non-financial concerns.
The law could hurt tycoons, said Richard Gussow, senior analyst at DS Securities. “They will have to restructure, sell companies,” he said.
A draft budget law, set to be approved by the Cabinet on Monday, includes measures that would cut red tape to increase food imports and limit dominant food retailers opening new shops — moves aimed at boosting competition and lowering prices.
Matan Hodorov, a senior economic commentator, said the attention being given to economic affairs was transforming public discourse.
“It’s an astounding change…. People now want to know what powers are at play, who makes the moves,” Hodorov said.